Since Lake Michigan Mailers began offering workers health insurance in the early 1990s, the company has considered the benefit as essential as paying wages. Now, David Rhoa, president of the direct-mail business his parents started, doesn’t know if he can afford to offer coverage beyond next year. Like many small businesses, the Kalamazoo (Mich.) company must contend with rising health-care costs and big questions about the reform law intended to keep them in check. “We told our people flat out that we’re having to take it on a year-to-year basis,” Rhoa says. “I’m 50-50 on whether or not we’re going to be able to do it. That’s troublesome to me.”

Starting in 2014, companies with 50 or more employees will have to provide insurance or pay a penalty, but a lot of the details haven’t been worked out. The law doesn’t penalize businesses with fewer than 50 “full-time equivalent” employees for not offering coverage. The government considers 30 hours a week to be full-time. Lake Michigan Mailers, which has more than $10 million in annual revenue, has 55 workers, 37 of them full-time and the rest part-time. By Rhoa’s math, he expects to hit the threshold. He’s also hiring, so even if the company isn’t yet big enough to face penalties, it might be when they kick in two years from now.

Rhoa faces another uncertainty: He’s not sure whether the plan he offers will meet the law’s requirements. If it doesn’t, he doesn’t know whether he can afford to buy one that does.

This year, Lake Michigan Mailers switched all its employees to a high-deductible health plan to lower costs. The company pays 79 percent of the premiums, and workers pay the remaining $55 per month. Employees get free physicals and many screenings and then pay up to $4,000 in out-of-pocket expenses before coverage kicks in. Most workers contribute to a health savings account to pay for care.

Rhoa moved to this arrangement reluctantly when more comprehensive coverage became too expensive. Whether it will be enough to help him avoid penalties is unclear. Employers “don’t know yet what is going to be considered an adequate offer of affordable coverage, so it’s a little hard to be making that determination,” says Gary Claxton, a vice president at the Kaiser Family Foundation, a health policy research group.

To pass muster with the law, employer plans must be “affordable” and provide “minimum value.” Congress let regulators set both those bars. Affordability means premiums can’t cost workers more than 9.5 percent of their family income, a threshold Lake Michigan Mailers surely meets. (At contributions of $55 per month, Roha’s workers would need to earn less than $7,000 per year for the plan to be considered “unaffordable.”)

The “minimum value” part of the equation is trickier. That requires the insurance plan to pay for at least 60 percent of medical care covered; that way workers won’t be so burdened by co-pays, deductibles, and other expenses that they can’t afford care even with insurance. Companies are waiting on a detailed proposal from the U.S. Department of Treasury to clarify whether the law also sets requirements for what a plan must cover.

If Lake Michigan Mailers’ plan doesn’t meet the requirements, Rhoa calculates it will be cheaper to pay the penalties, which he estimates at 42,000, than to buy a more comprehensive plan. He’d prefer to keep offering the benefits the company can afford. If he drops coverage, workers may get subsidies to buy their own plans in insurance exchanges. “I’ll end up paying a fine and irritating my employees at the same time,” he says.

Alden Bianchi, who leads the benefits practice at the Boston law firm Mintz Levin, doubts that many companies already providing coverage will drop it. “It’s not like employers are going to save a boatload of money by shipping people off health care” and shifting them to insurance exchanges, says the attorney, who advised Mitt Romney’s administration when Massachusetts passed its 2006 health-reform law.

Despite all the hand-wringing, Bianchi expects that employers will quickly adapt to the new law with little trouble. He recalls that the Cobra law, passed in 1986 to allow workers to temporarily keep health coverage after leaving a job, prompted initial howls from companies. “Within two or three years, it’s like, ‘Yawn, yeah, I do the Cobra thing,’” he says. “Things like this go through three stages: impossible, difficult, easy.”

Rhoa can’t wait to get to the easy part. He and his managers have spent more than 100 hours studying the law, attending seminars, and trying to plan the company’s benefits. He’s frustrated that he can’t project his health costs or guarantee coverage to his workers. “I need to attract and get good people,” he says. “I also need to keep my costs under control, and I need to have some predictability on what those costs are going to be.”

The bottom line With some rules not yet in place, small companies are struggling to figure out how health-care reform will affect them.

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